The Hindu Business Line : Extracting more

IN RAISING THE Customs duty on the palm group of oils by 15 percentage points and reducing their tariff values to reflect international market conditions, the Government has in one masterstroke tried to balance the interests of oilseed growers and consumers. Whether the Finance Minister, Mr P. Chidambaram, could have waited to make the changes a part of the around-the-corner Budget may be debatable; but the rationale of his action cannot be faulted. Indeed, it is positive for all stakeholders, including growers, consumers and processing industry. While the changes are revenue positive, they are nearly neutral as far as consumer prices are concerned. The psychological effect of the duty hike is sure to support rapeseed/mustard prices that have been ruling well below the minimum support price of Rs 1,700 a quintal. The processing industry can have nothing to complain about because it will recover the additional duty burden from consumers. So far so good.

In the edible oil sector, the next area of the Finance Minister's attention should be the excise duty on refined oils and vanaspati. Manufacture of refined oils and vanaspati can yield more than Rs 700 crore a year. However, the duty exemption granted to units in specified areas such as Kutch and the laxity in collection mean lower tax revenue on this account. The collection mechanism needs to be tightened. If production of solvent-extracted oils is also brought under the excise net and levied a duty of, say, Rs 1,000 a tonne, then imported crude oils would have to bear a similar countervailing duty. This will remove the anomaly created by the excise duty exemption to units in specified areas, and level the field for all refining units regardless of their location. While price and trade related measures such as duty changes are necessary, they are not sufficient to ensure the healthy growth and development of the oilseeds economy. This important food-processing sector is becoming increasingly import dependent and constantly looks to the government for sops. Non-trade initiatives to strengthen the domestic production base are critical. Shift of acreage in some of the irrigated regions from fine cereals to oilseeds, and programmes to raise oilseeds yields from the abysmally low levels of less than 1,000 kg a hectare deserve close attention. The Technology Mission on Oilseeds needs a complete overhaul.

Instead of remaining dependent on government favours and concessions, the private sector can play a constructive role in augmenting indigenous oilseeds production by, say, establishing backward linkages. If cotton can lend itself to contract farming, why not oilseeds? Hopefully, the Budget will have a package to revitalise the industry, a part of which — for instance, expeller mills — is turning sick because of lack of investment and modernisation. In his last Budget, Mr Chidambaram confessed to oilseeds being a critical area because despite the 25-million-tonne production, edible oil imports were a staggering $2.5 billion. He promised to help farmers diversify by promoting superior seed technology and through a policy of price support. In less than fortnight we will know what he proposes to do.

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